Settlement agreement discussions

Posted on 24th July 2013

Briefing note

From 29 July 2013 a new law allows your employer to hold ‘pre-termination negotiations’ or ‘protected conversations’ with you to make an offer for your employment to come to an end on agreed terms, and if done correctly, you will not be able to use this offer as evidence against your employer in any subsequent claim for unfair dismissal.

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In theory your employer can now approach you at any time and without warning and make you an offer to go, even if you are unaware of any pre-existing dispute about your employment

This briefing note looks at how this new type of protection works in practice and when it will not be possible for either party to use the conversations in subsequent unfair dismissal proceedings.

Why has the change been introduced?

Before 29 July 2013 any “without prejudice” offer from your employer to you to leave your employment on agreed terms would only be confidential if there was a pre-existing dispute in relation to your employment.

For an offer to be protected as “without prejudice” there has to be a pre-existing dispute. If so all discussions are ‘without prejudice’ and cannot be used as evidence in any court or tribunal proceedings (subject to limited exceptions). For example, if as an employee you are subject to a performance improvement plan and your employer offered you a severance package at a “without prejudice meeting” the offer and any discussions about it would be confidential in any subsequent legal proceedings.

In contrast if your employer called you into a meeting out of the blue and said the company wanted to make you an offer to go, the meeting would not be without prejudice because you were unaware there was any pre-existing problem or dispute about your work or employment.

For employers there can be uncertainty that any settlement offers or discussions are truly confidential and without prejudice. The danger for the employer is that if the without prejudice rule does not apply the employee can seek to use them as evidence against the employer to help show that any subsequent resignation or dismissal was unfair because the employer was “out to get me regardless”.

The new law from 29 July 2013

The new law from 29 July 2013 is an attempt to reduce the problems of the without prejudice rule. Therefore regardless of whether or not an employment dispute exists, discussions between you and your employer which are intended to bring your employment to an end will be confidential in subsequent unfair dismissal proceedings.

For example, if your employer calls you into a meeting and suggests that it may be time for you to “move on” from the business, you would not be able to tell the employment tribunal that such comments were made by your employer if you later claimed unfair dismissal.

This gives your employer increased flexibility to explore options with you to terminate your employment which may lead to the offer of a settlement agreement.

In theory your employer can now approach you at any time and without warning and make you an offer to go, even if you are unaware of any pre-existing dispute about your employment. This is quite a radical change to HR best practice and it will be interesting to see how this new law will be used by employers.

The new law does not abolish the existing without prejudice rule, which will continue to apply if correctly set up by the employer. Pre-termination negotiations should be seen as an alternative option for an employer to use.

Protection applies to unfair dismissal claims only

Importantly pre-termination negotiations are confidential in unfair dismissal claims only. Discussions therefore can be used as evidence in other employment tribunal claims including all types of discrimination, whistle blowing, breach of contract and unfair dismissals which are automatically unfair.

However, if an existing employment dispute does exist then “off the record” discussions may not be used by you as evidence in any proceedings if the ‘without prejudice’ rule, as explained above, applies.

Given this new rule applies to unfair dismissal cases only in practice it has limited benefit but will be a useful option for employers to use in the more straightforward cases.

Exception of improper conduct

The new law provides that the employment tribunal has discretion to allow evidence of pre-termination negotiations in unfair dismissal claims if you or your employer has behaved improperly during the negotiations.

Examples of improper behaviour include:

discrimination on the grounds of sex, sexual orientation, age, disability, race, religion or belief, pregnancy and maternity and marriage or civil partnership

Examples of undue pressure

Undue pressure to accept terms proposed to terminate your employment can amount to improper conduct by your employer. If this is proved, the negotiations may be used as evidence in unfair dismissal proceedings, if the tribunal agrees.

For example it could be undue pressure for your employer to threaten to dismiss you if you reject his settlement terms in circumstances where no disciplinary procedure has been started against you.

Another example is where your employer fails to give you reasonable time to consider his proposed settlement terms. There is no legal definition of what is a reasonable time, however, the ACAS Code of Practice 4 relating to Settlement Agreements suggests that employers should allow an employee at least 10 calendar days to consider terms proposed for terminating an employee’s employment and to seek independent advice.

Undue pressure is not limited to employers. An employee is also capable of placing undue pressure on an employer to agree settlement terms. For example, threatening to cause damage to an employer’s reputation if terms are not agreed. In such circumstances, a tribunal can decide whether to allow evidence of pre-termination negotiations and this behaviour in unfair dismissal proceedings.

We can help you

We understand that responding to and negotiating severance terms can be daunting, especially if you don’t know the true merits of your position. Our experienced employment law solicitors can support and guide you through discussions with your employer to check that meetings are conducted correctly and to help you secure the best possible settlement deal.

Our online forms are the easy and convenient way to tell us about your case. Our ‘save as you go’ feature lets you complete your answers in your own time.

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